mhm america figures, page-36

A PE of 15 is ridiculous in my view .

Why ?

It is clear from the Geelong contract and the US contracts are short term ie 2-3 years tenders .

In addition the alternative players in the space are all looking to improve their own technology , and ways to enhance their processes .

To give any more that a PE of 5 -6 means that we are certain in 5 -6 years time MHM will be still well ahead of the current pack . This is surely a risk , and why the PE of 5-6 is more relevant to pe OF 15 .

wE ALL KNOW they do not have any patents , BECAUSE THEY DO NO T WANT OTHERS TO COPY THEIR TECHNOLOGY , this confirms there is no protection for shareholders if others do come along , and undercut MHM when they look to roll contracts over .

At present as I understand it there is no new term contract from the initial 1 year SIms deal just the initial contract extended without any definition on time protection for MHM .

On this basis a PE of 5 or 6 is far more realistic , but on what do you calculate it ?

Normally it is current EBIT ?

As MHM have no current EBIT just a loss the commercial value is therfore all on potential , which I agree is reasonable and what you would expect it to be .

An analyst worth his salt , would be truing to determine what is sure, likely and then possible

3 different price models.

All that is given this financial year is Geelong and the company making a significant loss for the full year 2010/2011

In 2011/2012 , I expect you could also say Geelong will make $4m , and the US nil .

A Pe on this at 15 is $60m market cap . More than double the current price !

In 2012/2013 I expect Geelong another $4m and what the US is capable of is the unknown , and falls in to the likely and potential categories .

If you go with $15m , which is in my opinion a big ask , the current share price at a market cap of $140m is fully priced and on a PE of 7 times EBITDA .

The interest cost and depreciated establishment costs though are likely to be well in excess of $20m , if MHM do actually get $15m EBIT out of the US , so net profit would closer to 0 in that year as well .


In my opinion that is the bullish view, and a lot can go wrong in respect of delays etc .

To wait to see EBIT of such a number in 18 months time on the current premium confirms my thoughts that the stock is still suffering from exuberance resulting from the ongoing RBM reports, and the numerous roadshows thats intention was to attract buying and new investors.

I nore still despite so much volume we are yet to see a single institutional investor come out with a 5% SHAREHOLDER NOTICE .